Rx for success : ASD Specialty Healthcare opens 1st Internet site for online auctioning of pharmaceutical products - Company Business and Marketing

Health Industry Today, Nov, 1999

Physicians, materials managers and health care providers looking to expand their scope of Internet services can now add pharmaceutical products to their online shopping cart. For the first time, Internet auctions of pharmaceuticals are being conducted following the introduction of Pharmabid.com by ASD Specialty Healthcare, Dallas. ASD, a division of Bergen Brunswig, launched the industry's first Internet pharmaceutical auction site for providers in late October. The Web address provides licensed health care providers and pharmaceutical purchasing agents with an electronic vehicle for bidding for pharmaceutical products online. Initially, the site will concentrate on biologicals, like plasma, and primary care products, like vaccines. Introductions of additional products will happen later. Expanding the marketplace ASD was founded in 1993 as a subsidiary of Bergen Brunswig Corp. It is a supplier to the oncology, nephrology and urology markets and a provider of plasma and primary care products. The company grew through the acquisition of Oncology Supply, a distributor of oncology products to physicians, in 1995, and in 1997 acquired Besse Medical Services of Cincinnati, a supplier of vaccine and primary care products. "The company grew the business in areas that we were really focused on," says Neil Herson, vice president and general manager of ASD. He says parent Bergen Brunswig services one of every four oncology physicians in the country. ASD is on pace to to record more than $1 billion in sales in fiscal 1999. Today, ASD distributes more than 60,000 specialty products and services to about 17,000 physicians and 3,000 acute care facilities. The company is the nation's largest distributor of vaccine products and the second largest distributor of oncology plasma and nephrology products. All of which makes the company an ideal candidate for expansion into Internet auctions. Providing an alternative "The web site is intended as an alternative to mainstream pharmaceutical purchasing through GPO buying groups," says Herson. "At first, we'll focus on biologicals, on products that are non-returnable to manufacturers." Herson says ASD has a nearly constant oversupply of the biologicals & blood based products, products that require refrigeration, injectables, and products with short expiration dates. "We see the Internet as an opportunity to create options to traditional marketing and sales routes at prices that are very competitive, below market," Herson explains. "Really, what we are doing is adding value to the whole chain of distribution. Yes, there are contracts out there, but we can buy product below contract price and save money for our Web customers." The web site will ship next-day or same-day delivery to ensure product quality through what it calls special partnerships with Federal Express and UPS. "These are the products that have been very successful for us," says Herson. "At first we'll have about 50 products online, but the site is very durable & it could easily support 2,000-3,000 products per day. "The reality of it is that we want to start it small in order to expand it correctly." ASD distributes products from pharmaceutical and medical companies such as Bayer, Baxter, Hoechst Marion Roussel, Johnson & Johnson, Merck & Company, Upjohn and Roche but will be content to launch the web site solely with Bergen Brunswig and small biotech company products until the process is proven. ASD is required to be licensed in every state in order to ship pharmaceutical products. Logging on Business is conducted between 9 a.m. and 2 p.m. Eastern time in the English auction style, meaning ASD will set a reserve price that must be met or bettered. Bidders must first enroll with the Web site. The process is conducted through e-mail. Data is collected and a copy of issued bidding licenses are kept on file. Credit, says Herson, is extended immediately. Turnaround time, or the time it takes to get a bidder number back to the customer so that auction activity can begin, takes only about an hour. "The web site has been on the boards about six months," explains Herson. "We project a minimum of $12 million in business the first fiscal year, based on the activity of 50 initial products. We expect it to grow quickly & more and more people are going online." When a hospital materials manager or a physician office clicks online, the Web site is designed so that at the touch of the first screen a viewer will see the products offered and their prices. With the bidder number in hand, auction participants can log on, look at product descriptions, the quantity available and the reserve price. If a submitted bid is not the winning one, the participant is e-mailed and extended the opportunity to increase the bid. Bids can also be rescinded. Herson says there will also be a full-time customer service group to answer questions and facilitate the process. Reaching the customer

ASD thinks its primary customer will be purchasers for hospital groups or physician offices. In order to reach them the company is planning a mass FAX campaign launched at the pharmacy arena, mass mailings, exhibits at industry meetings. "The Internet is changing us all, and ASD is looking for more and more ways to add value," Herson claims.